Faced Over Facebook

by Michael Auslin

Except for one snarky and dismissive comment, I appreciate The Corner’s readers for educating me on how an IPO works. I realize that using the word “rigged” to describe the stock market in my post on how Morgan Stanley bought shares to keep Facebook’s price from dropping below its $38 offering last Friday misrepresented what the underwriter does. It still seems to me that, questions of an orderly offering aside, the months of lead-up to FB’s offering should have made both the company and the underwriter aware of what the market would bear for the stock.Therefore, having to step in to buoy the share price seemed to me an indicator not merely that they had miscalculated, but that they were pouring good money after bad, so to speak, which since 2008 has perhaps unfairly ominous overtones.

Sure enough, today, the stock closed just above $34, down 11 percent on the day and off 25 percent from its Friday high of $46. Now, Morgan Stanley is being criticized for offering too many shares and being too optimistic about the price, while NASDAQ has been hammered for its trading glitches during Friday’s opening hours.As for me, while I won’t spend too many hours in a trader’s shoes, it’s time for some capitalist re-education in the wayback machine:

The Corner

The one and only.